Hub Group, Inc. [HUBG] Filings

10-Q 1 hubg-20220331.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022 or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-27754

HUB GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

36-4007085

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2000 Clearwater Drive

Oak Brook, Illinois 60523

(Address, including zip code, of principal executive offices)

(630) 271-3600

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, par value $0.01 per share	HUBG	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒		Accelerated Filer	☐	Non-Accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

On April 29, 2022, the registrant had 33,997,814 outstanding shares of Class A common stock, par value $.01 per share, and 662,296 outstanding shares of Class B common stock, par value $.01 per share.

HUB GROUP, INC.

INDEX


	Page
PART I. Financial Information: Item1. Financial Statements
Consolidated Balance Sheets – March 31, 2022 (unaudited) and December 31, 2021	3
Unaudited Consolidated Statements of Income and Comprehensive Income – Three Months Ended March 31, 2022 and 2021	4
Unaudited Consolidated Statements of Stockholders’ Equity – Three Months Ended March 31, 2022 and 2021	5
Unaudited Consolidated Statements of Cash Flows – Three Months Ended March 31, 2022 and 2021	6
Notes to Unaudited Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosures about Market Risk	18
Item 4. Controls and Procedures	18
PART II. Other Information	18
Item 1. Legal Proceedings	18
Item 1A. Risk Factors	18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 6. Exhibits	19

HUB GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


	March 31,			December 31,
	2022			2021
ASSETS	(unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	206,896		$	159,784
Accounts receivable trade, net		766,579			701,512
Other receivables		3,153			3,022
Prepaid taxes		1,657			2,191
Prepaid expenses and other current assets		24,378			27,779
TOTAL CURRENT ASSETS		1,002,663			894,288

Restricted investments		21,497			24,256
Property and equipment, net		689,779			681,451
Right-of-use assets - operating leases		44,118			44,036
Right-of-use assets - financing leases		2,750			1,252
Other intangibles, net		190,252			196,672
Goodwill, net		576,847			576,913
Other assets		19,228			18,426
TOTAL ASSETS	$	2,547,134		$	2,437,294

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable trade	$	418,509		$	424,923
Accounts payable other		26,674			12,493
Accrued payroll		47,521			56,938
Accrued other		103,111			82,827
Lease liability - operating leases		12,131			11,364
Lease liability - financing leases		2,062			1,251
Current portion of long term debt		97,571			97,273
TOTAL CURRENT LIABILITIES		707,579			687,069

Long term debt		174,669			177,479
Non-current liabilities		42,183			41,572
Lease liability - operating leases		34,194			34,916
Lease liability - financing leases		681			-
Deferred taxes		160,857			155,944

STOCKHOLDERS' EQUITY:
Preferred stock: $.01 par value; 2,000,000 shares authorized; no shares issued or outstanding in 2022 and 2021	-			-
Common stock
Class A: $.01 par value; 97,337,700 shares authorized and 41,224,792 shares issued in 2022 and 2021; 33,988,791 shares outstanding in 2022 and 33,907,734 shares outstanding in 2021		412			412
Class B: $.01 par value; 662,300 shares authorized; 662,296 shares issued and outstanding in 2022 and 2021		7			7
Additional paid-in capital		189,168			189,256
Purchase price in excess of predecessor basis, net of tax benefit of $10,306		(15,458	)		(15,458	)
Retained earnings		1,512,137			1,424,634
Accumulated other comprehensive loss		(187	)		(207	)
Treasury stock; at cost, 7,236,001 shares in 2022 and 7,317,058 shares in 2021		(259,108	)		(258,330	)
TOTAL STOCKHOLDERS' EQUITY		1,426,971			1,340,314
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,547,134		$	2,437,294

See notes to unaudited consolidated financial statements.

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)


	Three Months Ended
	March 31,
	2022			2021

Revenue	$	1,298,123		$	919,553
Transportation costs		1,083,106			810,806
Gross margin		215,017			108,747

Costs and expenses:
Salaries and benefits		68,926			56,951
General and administrative		20,076			19,243
Depreciation and amortization		10,955			8,502
Total costs and expenses		99,957			84,696

Operating income		115,060			24,051

Other income (expense):
Interest expense		(1,698	)		(1,904	)
Other income (expense), net		131			(93	)
Total other expense, net		(1,567	)		(1,997	)

Income before provision for income taxes		113,493			22,054

Provision for income taxes		25,990			4,824

Net income		87,503			17,230

Other comprehensive income:
Foreign currency translation adjustments		20			(10	)

Total comprehensive income	$	87,523		$	17,220

Basic earnings per common share	$	2.60		$	0.52

Diluted earnings per common share	$	2.58		$	0.51

Basic weighted average number of shares outstanding		33,644			33,419
Diluted weighted average number of shares outstanding		33,966			33,775

See notes to unaudited consolidated financial statements.

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share amounts)


								Purchase Price
	Class A & B							of Excess of					Accumulated
	Common Stock				Additional			Predecessor					Other			Treasury
	Shares				Paid-in			Basis, Net			Retained		Comprehensive			Stock
	Issued		Amount		Capital			of Tax			Earnings		Income			Shares			Amount			Total
Balance December 31, 2020		41,887,088	$	419	$	186,058		$	(15,458	)	$	1,253,160	$	(191	)		(7,675,084	)	$	(266,065	)	$	1,157,923
Stock withheld for payments of withholding taxes		-		-		-			-			-		-			(65,979	)		(3,759	)		(3,759	)
Issuance of restricted stock awards, net of forfeitures		-		-		(9,170	)		-			-		-			271,307			9,170			-
Share-based compensation expense		-		-		5,117			-			-		-			-			-			5,117
Net income		-		-		-			-			17,230		-			-			-			17,230
Foreign currency translation adjustment		-		-		-			-			-		(10	)		-			-			(10	)
Balance March 31, 2021		41,887,088	$	419	$	182,005		$	(15,458	)	$	1,270,390	$	(201	)		(7,469,756	)	$	(260,654	)	$	1,176,501


Balance December 31, 2021		41,887,088	$	419	$	189,256		$	(15,458	)	$	1,424,634	$	(207	)		(7,317,058	)	$	(258,330	)	$	1,340,314
Stock withheld for payments of withholding taxes		-		-		-			-			-		-			(66,369	)		(5,585	)		(5,585	)
Issuance of restricted stock awards, net of forfeitures		-		-		(4,807	)		-			-		-			147,426			4,807			-
Share-based compensation expense		-		-		4,719			-			-		-			-			-			4,719
Net income		-		-		-			-			87,503		-			-			-			87,503
Foreign currency translation adjustment		-		-		-			-			-		20			-			-			20
Balance March 31, 2022		41,887,088	$	419	$	189,168		$	(15,458	)	$	1,512,137	$	(187	)		(7,236,001	)	$	(259,108	)	$	1,426,971

See notes to unaudited consolidated financial statements.

HUB GROUP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


	Three Months Ended
	March 31,
	2022			2021
Cash flows from operating activities:
Net Income	$	87,503		$	17,230
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		35,193			32,111
Deferred taxes		5,286			4,325
Compensation expense related to share-based compensation plans		4,719			5,117
Gain on sale of assets		(4,745	)		(1,924	)
Changes in operating assets and liabilities, net of acquisition:
Restricted investments		2,759			1,618
Accounts receivable, net		(65,288	)		8,389
Prepaid taxes		535			350
Prepaid expenses and other current assets		3,403			8,825
Other assets		(1,516	)		(189	)
Accounts payable		7,771			36,820
Accrued expenses		7,130			18,695
Non-current liabilities		(2,540	)		(3,994	)
Net cash provided by operating activities		80,210			127,373

Cash flows from investing activities:
Proceeds from sale of equipment		6,444			14,933
Purchases of property and equipment		(30,927	)		(9,522	)
Net cash (used in) provided by investing activities		(24,483	)		5,411

Cash flows from financing activities:
Repayments of long-term debt		(26,024	)		(33,381	)
Stock withheld for payments of withholding taxes		(5,585	)		(3,759	)
Finance lease payments		(526	)		(772	)
Proceeds from issuance of debt		23,512			6,894
Net cash used in financing activities		(8,623	)		(31,018	)


Effect of exchange rate changes on cash and cash equivalents		8			(8	)

Net increase in cash and cash equivalents		47,112			101,758
Cash and cash equivalents beginning of the period		159,784			124,506
Cash and cash equivalents end of the period	$	206,896		$	226,264

Supplemental disclosures of cash paid for:
Interest	$	1,870		$	2,005
Income taxes	$	620		$	317

See notes to unaudited consolidated financial statements.

HUB GROUP, INC.

NOTES TO UNAUDITED

CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Interim Financial Statements

Our accompanying unaudited consolidated financial statements of Hub Group, Inc. (the “Company,” “Hub,” “we,” “us” or “our”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been omitted pursuant to those rules and regulations. However, we believe that the disclosures contained herein are adequate to make the information presented not misleading.

The financial statements reflect, in our opinion, all material adjustments (which include only normal recurring adjustments) necessary to fairly present our financial position as of March 31, 2022 and results of operations for the three months ended March 31, 2022 and 2021.

These unaudited consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. Results of operations in interim periods are not necessarily indicative of results to be expected for a full year due partially to seasonality.

NOTE 2. Acquisition

Choptank Transport, LLC Acquisition

On October 19, 2021, we acquired 100% of the equity interests of Choptank Transport, LLC (“Choptank”). Total consideration for the transaction was $127.6 million in cash and the settlement of accounts receivable due from Choptank of $0.3 million. In connection with the acquisition, we granted approximately $22 million of restricted stock to Choptank's owners and senior management team, which is subject to certain vesting conditions. The grants of restricted stock were made pursuant to award agreements and issued under our 2017 Long Term Incentive Plan.

The acquisition of Choptank enhanced our refrigerated trucking transportation solutions offering and complemented our growing fleet of refrigerated intermodal containers. Choptank has developed a proprietary technology platform that we will leverage to enhance our truck brokerage service line.

The initial accounting for the acquisition of Choptank is incomplete as we, with the support of our valuation specialist, are in the process of finalizing the fair market value calculations of the acquired net assets. Certain post-closing activities outlined in the acquisition agreement remain incomplete. As a result, the amounts recorded in the consolidated financial statements related to the Choptank acquisition are preliminary and subject to change.

The following table summarizes the preliminary allocation of the total consideration to the assets acquired and liabilities assumed as of the date of the acquisition (in thousands):


	October 19, 2021
Cash and cash equivalents	$	5,596
Accounts receivable trade		71,482
Prepaid expenses and other current assets		419
Property and equipment		169
Right of use assets - operating leases		922
Goodwill, net		54,487
Other intangibles		60,500
Total assets acquired	$	193,575

Accounts payable trade	$	60,970
Accrued payroll		3,458
Accrued other		359
Lease liability - operating leases short-term		309
Lease liability - operating leases long-term		613
Total liabilities assumed	$	65,709

Total consideration	$	127,866

Cash paid, net	$	122,270

The Choptank acquisition was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded in the accompanying consolidated balance sheet at their estimated fair values as of October 19, 2021 with the remaining unallocated purchase price recorded as goodwill. The goodwill recognized in the Choptank acquisition was primarily attributable to potential expansion and future development of the acquired business.

The following table presents the carrying amount of goodwill (in thousands):


	Total
Balance at December 31, 2021	$	576,913
Acquisition		(66	)
Balance at March 31, 2022	$	576,847

The changes noted as "acquisition" in the above table refer to purchase accounting adjustments related to the Choptank acquisition.

Tax history and attributes are not inherited in an equity purchase of this kind, however, the goodwill and other intangibles recognized in this purchase will be fully tax deductible over a period of 15 years.

The components of “Other intangibles” listed in the above table as of the acquisition date are preliminarily estimated as follows (in thousands):


			Accumulated		Balance at		Estimated Useful
	Amount		Amortization		March 31, 2022		Life
Customer relationships	$	36,300	$	1,210	$	35,090	15 years
Carrier network	$	14,400	$	1,800	$	12,600	4 years
Developed technology	$	6,500	$	464	$	6,036	7 years
Trade name	$	3,300	$	1,100	$	2,200	18 months

The above intangible assets are amortized using the straight-line method. Amortization expense related to this acquisition for the three months ended March 31, 2022 was $2.3 million. The intangible assets have a weighted average useful life of approximately 10.63 years. Amortization expense related to Choptank for the next five years is as follows (in thousands):


	Total
Remainder of 2022	$	6,861
2023		7,499
2024		6,949
2025		6,049
2026		3,349

The following unaudited pro forma consolidated results of operations present the effects of Choptank as though it had been acquired as of January 1, 2021 (in thousands, except for per share amounts):


	Three Months Ended
	March 31, 2021
Revenue	$	1,013,931
Net income	$	16,538
Earnings per share
Basic	$	0.49
Diluted	$	0.49

The unaudited pro forma consolidated results for the annual periods were prepared using the acquisition method of accounting and are based on the historical financial information of Hub and Choptank. The historical financial information has been adjusted to give effect to the pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the Choptank acquisition as of January 1, 2021.

NOTE 3. Earnings Per Share

The following is a reconciliation of our earnings per share (in thousands, except for per share data):


	Three Months Ended, March 31,
	2022